FHFA Just Stress-Tested Fannie and Freddie Through a Worse-Than-2008 Housing Crash. They Broke Even.

If you're new here: I'm Glen Bradford. I'm long Fannie Mae and Freddie Mac junior preferred shares and have written the full Fanniegate thesis for years. Every August, FHFA publishes the results of the Dodd-Frank Act Stress Tests — DFAST — where Fannie and Freddie are run through a hypothetical economic catastrophe to see whether they have the capital to absorb the losses. The 2026 results came out today, August 14, 2026. Every number below is from the FHFA report (mirrored here) and last year's edition (mirrored here), both linked in full at the bottom.

One important caveat up front, in FHFA's own words: these projections "are not expected outcomes." They are what-if modeling of a prescribed disaster. That's exactly why they matter — the disaster is prescribed by the regulator, and the companies still shrug it off.

The disaster FHFA prescribed

The 2026 Severely Adverse scenario runs nine quarters, from a December 31, 2025 jump-off through March 31, 2028. Here's what it assumes happens to the U.S. economy:

• Home prices fall about 30% from year-end 2025 levels through late 2027. For reference, the actual national peak-to-trough decline in the 2006–2012 housing bust was roughly 27%. This scenario is worse than the crisis that put these companies into conservatorship.
• Unemployment rises 5.5 percentage points to a peak of 10%.
• Real GDP falls 4.6%.
• Equity prices fall 58%. Commercial real estate falls 39%. BBB corporate spreads blow out to 5.7 percentage points.
• On top of the macro scenario, a global market shock hits the retained portfolios instantly, including the assumed failure of each company's single largest counterparty — a definition FHFA broadened to include mortgage insurers, nonbank servicers, and credit-risk-transfer reinsurers.

That's the test. Here's the result.

The result: a rounding error

Cumulative, Q1 2026 – Q1 2028	Combined	Fannie Mae	Freddie Mac
Pre-provision net revenue	$71.4B	$35.5B	$35.9B
Provision for credit losses	($58.6B)	($35.0B)	($23.5B)
Mark-to-market gains (losses)	($6.1B)	($3.2B)	($2.9B)
Global market shock + counterparty default	($7.1B)	($3.9B)	($3.2B)
Total comprehensive income (loss)	($0.1B)	($4.9B)	+$4.8B
Net worth at end of scenario (Q1 2028)	$179.4B	$104.1B	$75.2B
CET1 capital at end of scenario	($69.9B)	($51.7B)	($18.2B)
Credit losses (% of avg. portfolio)	0.43%	0.51%	0.34%

Read the comprehensive income line again. Through a housing crash worse than 2008, 10% unemployment, a 58% equity collapse, and the failure of their largest counterparties, the two companies combined lose $100 million. Not billion. Million. Freddie Mac earns its way straight through the apocalypse with $4.8 billion of comprehensive income. Fannie loses $4.9 billion — about five weeks of combined normal earnings.

The mechanism is simple and it's the whole business model: $71.4 billion of pre-provision earnings power over the nine quarters absorbs the entire $58.6 billion credit provision with room to spare for the market shock. Guarantee-fee income doesn't stop arriving because house prices fall. That's what a fortress income statement looks like.

And they end the scenario with $179.4 billion of net worth — essentially the same net worth they carry into it. In 2008, the book these companies held required $191 billion of Treasury draws. Today's book, run through a worse housing shock, requires zero. Not a smaller bailout. Zero.

Thirteen years of stress tests, and the trend only goes one way

This is the thirteenth DFAST for the Enterprises, and stacked against last year's edition, the fortress got thicker again:

Combined, severely adverse	2025 DFAST	2026 DFAST
Pre-provision net revenue	$57.3B	$71.4B
Total comprehensive income (loss)	+$8.6B	($0.1B)
Post-stress net worth	$162.8B	$179.4B
Post-stress CET1	($80.3B)	($69.9B)

The scenarios aren't identical year to year — 2026 has a milder GDP decline (−4.6% vs −7.8%) but a nastier equity crash (−58%) and a substantially harsher commercial real estate collapse (−39% vs −30%). The through-line is that every year the companies retain earnings, the post-stress balance sheet lands higher. The 2025 report also ran an alternate case where the companies write off their deferred tax assets mid-crisis; even that worst-of-the-worst case was a combined loss of just $6.7 billion. This year's report presents results without a DTA valuation allowance — the bullet in FHFA's own results section notes Fannie projected losses and Freddie projected income on that basis.

About that "negative CET1" — you've seen this movie

The one scary-looking number in the table is post-stress CET1 of negative $69.9 billion. If you read yesterday's post on the Q2 2026 ERCF capital disclosures, you already know exactly what this is: an accounting artifact of the senior preferred stock, not an economic hole.

CET1 starts from net worth and then excludes Treasury's $193.5 billion of senior preferred at face value, excludes the junior preferred (which comes back as Tier 1), and deducts deferred tax assets. The companies exit the stress scenario with $179.4 billion of actual net worth — the "deficit" exists because the capital rule scores the largest equity item on both balance sheets as zero.

Run the same one-move fix against the stress results that I ran against the Q2 disclosures: resolve the senior preferred at its $193.5 billion face value, and post-stress CET1 goes from negative $69.9 billion to roughly positive $124 billion — right at the roughly $123 billion of combined CET1 minimums the companies disclosed for Q2 2026. Sit with that: after the worse-than-2008 crash, with the seniors resolved at face, the companies are still at their regulatory minimums. Before the crash, they'd clear minimums with about $25 billion to spare and a four-year earnings glide path to fully buffered.

And it's one more data point for an argument I made back in June in ERCF Capital Requirements vs. Stress Tests: the ERCF's fully buffered requirements demand a capital stack that is wildly out of proportion to what the regulator's own stress test says the companies can lose. The 2026 DFAST says the loss in a prescribed catastrophe is $0.1 billion. The fully buffered ERCF ask is roughly $260 billion of combined CET1. Those two numbers are published by the same agency.

What this means for the release

The strongest argument against ending the conservatorships has always been some version of "what if there's another 2008?" This report is FHFA answering its own question, in its own annual publication, for the thirteenth consecutive year: there was another 2008 in the model, and it cost the companies a rounding error.

• The companies carry $194.3 billion of combined net worth today and would still have $179.4 billion after the prescribed disaster.
• Credit losses in the disaster run 0.43% of the portfolio over nine quarters. The book that produced the conservatorship is gone; the book that replaced it is the cleanest in the companies' history.
• The entire 2026 policy apparatus has spent the year teeing up the exit. The last technical objection — "they're undercapitalized" — is a classification choice about one instrument, as the companies' own Q2 disclosures showed, and now the regulator's own stress test shows the underlying balance sheet doesn't even flinch at Armageddon.

What I'm doing

Nothing new — long the junior preferred, same as I've been for years. The DFAST doesn't change the position; it removes another bear talking point. The juniors sit in Tier 1 capital, the seniors are one signature away from resolution at face value, and the regulator just published a report saying the operating business breaks even through a crisis worse than the one that started this whole saga. The next scheduled catalysts: quarterly earnings, the November ERCF disclosures, and whatever Washington does next. The numbers keep marching one direction while we wait.

---

The Sources

• FHFA 2026 Dodd-Frank Act Stress Test Results — Severely Adverse Scenario — published August 14, 2026 (PDF mirror)
• FHFA 2025 Dodd-Frank Act Stress Test Results — for the year-over-year comparison (PDF mirror)
• FHFA DFAST program page — all thirteen years of results

If You Want to Go Deeper

• Full Fanniegate thesis — the whole story
• The Q2 2026 ERCF Capital Disclosures — yesterday's post: the companies' own recap math, and why negative CET1 is a classification artifact
• ERCF Capital Requirements vs. Stress Tests — the June argument this report just re-proved
• It's All One Move — how the senior preferred resolution and the "capital shortfall" are the same problem
• The Trump GSE Promotion Timeline — the policy drumbeat, dated and sourced
• Fanniegate Timeline — interactive milestone history

---

I hold long positions in Fannie Mae and Freddie Mac junior preferred shares. This post is my personal opinion and is not financial advice. All stress test figures are from FHFA's own published DFAST reports, linked and mirrored in full above, so you can check my math and disagree with me. FHFA's projections are modeled what-if exercises, not forecasts — and so is every recap scenario in this post. Do your own research. The full thesis is at glenbradford.com/fanniegate.